Tuesday, October 04, 2022

How many more Delawares?

How many Delawares do we have left to give to the Gulf of Mexico? This question is raised in  a recent T-P story highlighting the very-nearly-approved status of the long awaited Mid-Barataria Sediment Diversion Project.  "Decades in the making," says this article and that's certainly true.  "Game changing," it says also. Well, maybe it would have been if this and five or six other projects like it had begun decades ago.  But now it is much more likely too little too late. The coast has been neglected for too long and the seas are now rising too quickly. Eventually we are going to run out of Delawares.

Louisiana has lost land roughly equivalent to the size of Delaware since the 1930s. It could lose two more Delawares in the next half-century if no action is taken to stop it.

The catastrophe is no longer a pending event contingent on actions we can take anymore. It is already here. We see it all the time. We hardly even need to be told about it anymore, but we do love to read about it anyway. Here is a story from July of this year telling us one of our favorite tales.  The Louisiana coast, according to a new study from the US Geological Survey, is DOOMED. 

As the state's saltwater wetlands migrate inland due to sea level rise fueled by global warming, they will cause a loss of freshwater wetlands at a rate that is likely to be the highest in the nation, the study shows.

The study also raises serious concerns about the consequences of not keeping worldwide temperatures from rising more than 2 degrees Celsius above pre-industrial levels by 2100, which could result in global water heights of as much as 8.2 feet. In Louisiana, with subsidence, the water heights could be as much as 10 feet above present levels.

That worst-case sea level rise scenario would result in saltwater intrusion causing the collapse of thousands of miles of existing saltwater and freshwater wetlands, again exacerbated by human-caused barriers to their migration inland. 

2100 is not that very far into the future. 

2050 is even nearer.

It’s no surprise that Louisiana, where the seas are swelling and land is sinking, faces a daunting loss of property in the years to come. The Climate Central analysis estimated that more than 25,000 properties, totaling nearly 2.5 million acres in the state, could fall wholly below tidal boundary lines by 2050 — a number that far exceeds any other place in the nation. That would amount to 8.7 percent of Louisiana’s total land area, the report found.

Insurers have already decided what all of this means. They've decided it's time to cut and run

Louisiana Citizens Insurance Corp., the state’s insurer of last resort, wants to raise its already-high prices by more than half, following a dramatic increase in demand for coverage after eight private insurers collapsed [update: it is nine now]and nearly a dozen others exited the state.

The organization has asked the Louisiana Department of Insurance for a 63% rate increase for personal property coverage, which would hit its more than 102,000 homeowners policies, records show. If approved, the rate increase could generate as much as $158 million that officials say is needed to cover their risk.

The last rate increase Louisiana Citizens received, by comparison, was 4.8% for new and renewing policyholders. It went into effect June 1.

The wave of hurricanes that began in 2020 triggered a chain of events that’s putting more pressure on Louisiana’s troubled insurance marketplace. Several insurers, crippled by a staggering number of claims, have gone out of business or pulled out of the state. They’ve left behind desperate consumers who are now flocking to Louisiana Citizens in numbers not seen in years.

The solution, just about everybody in politics seems to agree, is "resilience."

But what does resilience mean, exactly? It may sound like it has something to do with preserving vulnerable communities and infrastructure but it does not.  In the context of the cascading disasters of the 21st Century, "resilience" is a shell game of shifting risks. Its rhetorical purpose is to move the burden of mitigating and responding to the growing hazards of environmental damage and climate change away from the institutions responsible and onto the individual victims of that damage. "Resilience" is a politician's call for the powerless to bear the cost of crimes committed by the powerful.

It's a grift that can work in several ways. Last year, Entergy provided us with one example. At the time we had been told the private utility giant had agreed to front the money to build Sewerage and Water Board a new power station intended to finally obviate its reliance on the famous antiquated turbine system that powers the city's drainage pumps.*  But later in the year, they backed out of that agreement claiming that emergency response to Hurricane Ida had eaten too far into their cash.  So, naturally, the city then stepped in and used American Rescue Plan funds originally intended for COVID relief to pay for the station.  

*(note: even the initial promise here was suspicious at the time but since they broke it anyway that's a bit of a moot point now)

But 2021 actually turned out to be a great year for Entergy cash-wise. They had so much floating around that they barely knew what to do with it. They paid out $1.5 billion to shareholders. Entergy CEO Leo Denault received $17 million in compensation that year.  It is only to protect these pay-outs that the city was manipulated into spending COVID relief funds making up for Entergy's broken commitment. In other words, we ended up paying for the resilience of the company's profits by foregoing investment in the resilience of our own people. 

This isn't an unusual event. It's actually very much in line with emerging global economic strategy. Economist Daniela Gabor reported from the COP26 international climate summit last year that policymakers are financializing the climate response by blending public resources (like federal COVID relief to cities, for example) with "bankable projects" (such as Entergy's operations) that create returns for investors.  It turns out the global strategy is to shift the costs and risks associated with the ravages of climate change downward onto the many subjects of capitalism in order to protect the profits of its masters.

This is the Wall Street Consensus mantra: the state and development aid, including multilateral development banks, should escort the trillions managed by private finance into climate or the Sustainable Development Goals asset classes. The state derisks or “blends” by using public resources (official aid or local fiscal revenues) to align the risk-return profile of those assets (“bankable projects”) with investor preferences or mandates. Transforming climate or nature into asset classes necessitates the commodification and financialization of public goods and social infrastructure, beyond water, electricity and transportation, and including housing, education, healthcare; these have to generate cash flows that pay institutional investors. The consensus understands the state as a derisking agent: its fiscal arm enters public-private partnerships to render them bankable by transferring some of the risks to the balance sheet of the sovereign, while its monetary arm protects investors from liquidity and exchange rate risk.

And so there is a whole class of financial speculation based on this.

It's called Environmental, Social and Corporate Governance (ESG) investment. So-called "woke capital.

Increasingly, big investors and fund managers are positioning themselves as ethical intermediaries at the center of a new movement for “impact investing” — investments that claim to prioritize environmental, social, and governance concerns. BlackRock, Invesco, Aberdeen, and Vanguard — all of whom who have signed on to the UN-supported Principles for Responsible Investment — promise that they can help align people’s money with their values.

“Socially responsible investing” has been around for decades, but it’s taken off recently. Sustainable assets under management are now estimated to be around $30 trillion. So-called green bonds — fixed income instruments used to fund green projects such as wind farms or low-impact housing — have proliferated. Even entire countries — Belgium, France, Poland, Indonesia — are issuing them.

Meanwhile, companies like Vanguard have set up new “green” exchange-traded funds that exclude oil and gas companies and nuclear power. Although funds that avoid “sin stocks” (adult entertainment, alcohol, tobacco, weapons, gambling) are an old idea, their pivot toward supposed green investments has proven extremely popular, fueling an expansion worth hundreds of billions of dollars.

How, you might ask, do investors and money managers determine if a company is really green? Back in the ’90s, the small number of investors interested in “corporate social responsibility” used metrics provided by the Global Reporting Initiative. These days CSR (corporate social responsibility) has been replaced with ESG (environmental, social, and governance) numbers that include data on emissions, labor practices, diversity, board independence, and supply chain information — the vast majority of which is self-reported by companies.

Maybe you can sense the turn that article (titled "Green Investing is a Sham") is about to take.  The point we'd like to make, though, is that it is also a  "resilience" strategy for finance. Former Blackrock investment strategist Tariq Fancy published a series of essays called “Secret Diary of a Sustainable Investor”  Here is what he says ESG investment is about.

Meanwhile, ESG 1.0 pollutes our airwaves, masquerading as the business community’s best and most honest answer to society’s challenges. One of the most ridiculous premises on which this rests is the bizarre conflation between fighting climate change and fighting climate risks. This is important: fighting climate risks in financial portfolios is not the same thing as fighting climate change itself. A friend of mine who lives in Miami was buying a house recently and seemed happy that my previous work was so heavily focused on climate risks, including extreme weather events that affect Miami. I felt bad breaking it to him: “Carlos, we’re not trying to save Miami from getting wrecked by climate change. We’re trying to get our money out before it hits.”

New Orleans is not going to be saved from climate change either. Instead it will be squeezed more and more tightly by tourism and real estate until the last profits are wrung out of whatever exploited and beaten down population can remain.. until they can't anymore.

"Resilience," then, is a long process of forcing you to adjust to increasing precarity. Some examples from this year: Over the summer, a judge ruled that insurance companies don't have to cover your evacuation expenses.  You have to be resilient. FEMA says changes to its flood insurance program are intended to price out something like one million people. Only those "resilient" enough to hack it in the coastal regions that have been their home can afford to remain. No one will help them move out of harm's way, of course.  Individuals bear the brunt of things like the rising costs of mortgages, insurance, and energy bills in New Orleans. We take on more of the risk of just trying to live here.

Here's a Times-Pic article from July 4 of this year where the reporter talks to people about what that feels like. I want to emphasize the allocative effect of these markets on who can and cannot weather the storm, so to speak. The spike in rates is specifically bad for individuals "who must rely on loans" to buy a home. 

“I just had a client get a $10,000 quote on homeowners insurance,” said (realtor Bryan) Jourdain. Before his client made an offer on the target house, Jourdain met with the existing owners and learned that they were paying $2,800 annually for coverage.

“I knew the buyer would have to pay more, but I guessed that the premium might be around $5,000,” he said. “$10,000 is ludicrous.”

For buyers who can afford such surprises, the jumps in cost probably won’t come between them and a new home. But for first-time buyers like Latiker and others who must rely on loans to close deals, such unexpected cost hikes can be deal killers.

On the other hand, for large investment firms that pay cash to turn houses into hotels... or more to the point, who seek to quickly flip properties as assets based on their potential profits as such... The cost of the transaction is not much changed. 

By leaving climate unmitigated, and by leaving the social costs to be borne by individuals experiencing "market forces" rather than as a community facing collective destruction, we have chosen, as a matter of policy, to sacrifice New Orleans as we know it to corporate profit "Resilience" it turns out, is a luxury good.

Anyway, we talked about this and more in episode 2 of CBC after having watched the straight-to-DVD classic "Hurricane Season" staring Forrest Whitaker.  It's a bit long but it's here if you're interested.

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